5 questions to ask before you (don’t) sign up for a store credit card

At some point the offer will come. It could happen during the family’s traditional shop-till-you-drop excursion on Black Friday. Or while you’re stalking deals during your frenzied lunch hour on Cyber Monday. Sign up for this store credit card and you’ll save a bunch of money, right now!

Before you take the store card plunge, you should know this: Avoiding a store credit card could be one of the best financial moves you make. For many people, these cards are a trap—one that’s a lot harder to get out of than it was to sign up for at the checkout counter. Hit the brakes and ask yourself these five questions before applying:

1. Can I pay it off immediately?

Let’s say that in the name of Black Friday, you sign up for a combination of store cards and buy $1,500 worth of gifts for $1,000. You’re feeling pretty good about your $500 in savings. But when the card issuers come asking for the $1,000 you owe, you can’t afford to pay it all off, so you kick the can down the road, making the minimum payment.

Now, check out the chart below to see what your future holds:

Look closely: If you make only the minimum payment each month, you’ll be paying off those presents for more than seven years to come, and you’ll shell out $1,199 in interest—dwarfing that savings of $500 and turning that discount into what amounts to a hefty surcharge.

Why the huge comeuppance?

“The interest rate on retail cards is often very high,” said Gerri Detweiler, education director for Nav, a credit education service for small business owners. “So, you definitely want to avoid carrying a balance on a retail card.”

While ordinary credit cards charge around 15% interest, your typical Banana Republic store card charges an Annual Percentage Rate (APR) of 26%. That’s why store cards tend to be an especially expensive type of plastic, if you don’t pay them off right away.

2. Am I rushing into this?

The checkout line is not an ideal place to make a snap decision that will have a lasting impact on your finances. Do some research before they do the hard sell, so you know in advance the terms of the store card, including its interest rate and the value of any promotions or rewards programs.

If you’re not prepared, don’t let a salesperson pressure you into a decision that could likely be a serious mistake. It may take some quick thinking.

“Usually a ‘No, thank you’ will do the trick, but I have had some situations where the clerk seemed a little aggressive to me,” Detweiler said. “If they’re too persistent, I always say I’m in the process of buying a house right now and can’t apply for any new credit because it could affect my credit score. That usually stops them.”

3. Is the discount really that great?

You may be able to beat the store card promotion with free tools that let you to comparison-shop and poke around for promo codes.

“Generally, you’re better off turning down these offers unless you’re making a significant purchase—or it’s a store that you often shop at often, because you may be able to snag some good discounts on ongoing basis,” Detweiler said. “Significant could be you’re remodeling your kitchen and you’re going to open a card at one of the big-box retailers to get 15% off.”

4. Will I monitor this new account?

Americans tend to hold at least one credit card, with an average balance of more than $1,000. But that doesn’t mean they’re swiping every day. In fact, store cards can easily get buried in your wallet behind your go-to debit or credit card. And that neglect can be dangerous.

“If you have a card that you don’t use very often, you might forget about it,” Detweiler said.

One missed payment on that Macy’s card can hurt your credit score for years. The moment you apply for a card, set reminders for yourself to sign up for paperless billing and automatic payments. Then, stay on top of the account to make sure all payments go through and your balance is zero. Free money tracking apps can help. Even if you don’t use the card for months at a time, it can still affect your credit health.

5. Will I come out ahead?

You can benefit from rewards cards, but only if you’re smart about them. Likewise, store cards can work to your advantage, but only if you’re a certain kind of shopper—and on the ball when it comes to paying off debt. For example, if you’re a loyal J. Crew shopper, get an unbeatable discount each time you use the card, and pay off your bill immediately, you can enjoy the card’s benefits without paying discount-erasing interest or hurting your credit score.